The much-debated and anticipated new tax regime expected to fund the 2020 budget and restructure tax administration in Nigeria will take effect from the 2nd of January next year.
According to Punch, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, in a panel session at the PwC Executive Session on Finance Bill and Tax Strategy, the bill would be revised yearly as the Federal Government is planning to grow the ratio of revenue to Gross Domestic Product (GDP) from 6% to 15% by 2023, with a greater percentage of revenue coming from non-oil sources.
The minister disclosed that the long-term goal of the bill is to stabilize the Nigerian economy, reducing the reliance of the foreign exchange earned from oil receipts. The government plans to engage stakeholders annually and ensure their opinions reflect on the outcome of the deliberations in the finance bill.
“One of the biggest challenges of all is our high dependence on oil for our economic activities, fiscal revenues and foreign exchange earnings. In 2016, Nigeria fell into recession due to its vulnerability to oil. Although the oil and gas sector accounted for just about 10% of the GDP, it represented 94% of export earnings and 62% of government revenues (federal and state) in 2011-2015,” Ahmed said.
However, Mrs Ahmed stated that the narrative is changing when it comes to the country’s reliance on oil receipts, even in the presence of high unemployment and poverty levels. The government stated that its desires are to see the country’s revenue to GDP ratio hit 15% by 2023 and tax to GDP ratio growth over 6% recorded in 2018.
“This narrative is changing but we still have much more to do to get to our desired revenue to GDP ratio of 15% by 2023, which we anticipate to come from non-oil revenues. We must grow our tax to GDP ratio from the current six per cent as of 2018.
“Tho the Nigerian economy is characterised by structural challenges that limit the country’s ability to sustain economic growth, create more jobs and achieve significant poverty reduction,” said Ahmed.
Mrs Ahmed stated that based on the non-oil revenue performance as of June 2019, the country was on track to further improve the tax to GDP ratio, although Nigeria is still below the sub-Saharan Africa average of about 19%.
Upshot:The bill is expected to stimulate growth in the Small and Medium Enterprise (SME) space, ultimately drive increased growth rate for the economy and ease business operations, alleviating the regulatory burdens for SMEs